Friday November 14, 2008 - 12:58:46 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro/dlr falls; euro zone slips into recession
* Euro/dlr <EUR=> down 1 pct at $1.2688
* GDP data confirms single currency zone in recession
* Higher European shares do little to boost risk demand
* Investors await G20 meeting in Washington
(releads, adds quotes, updates pries)
By Veronica Brown
LONDON, Nov 14 (Reuters) - The euro fell against the dollar
and the yen on Friday, brushing off a rise in European shares
with risk aversion running high as data confirmed the single
currency zone had slid into recession.
Figures earlier in the day showed France had managed to eke
out positive growth in the third quarter, but separate data put
the euro area in its first ever technical recession after German
growth figures on Thursday confirmed two consecutive quarters of
The euro zone economy contracted 0.2 percent for the second
time in a row quarter-on-quarter in the July-September period,
an official estimate showed [nLE565143].
"The presumption has to be that the news flow for Q4 isn't
getting any better. It's still all about risk and deleveraging,"
Rabobank markets strategist Jeremy Stretch said.
"The ECB perhaps are still to get on top of the potential
downside risks for the economy so there's still a lot of
pressure to be seen on monetary policy," he added.
By 1142 GMT, the euro <EUR=> was 1 percent lower on the day
at $1.2688, nearing a two-week low of $1.2387 hit on Thursday.
The single European currency <EURJPY=> also struggled
against the low-risk, low-yielding yen, falling 1.4 percent to
123.02 yen. A near-3 percent rise in European shares .FTEU3
offered little joy to the struggling euro.
Despite its broad weakness, the euro hovered near a record
high against sterling hit the previous day as investors are
convinced a recession in the UK will be more severe than in the
euro zone. The pair traded at 85.69 pence, near an all-time high
of 86.62 pence.
Sterling suffered across the board, hovering near a 6-1/2
year low against the dollar <GBP=> of $1.4555 hit on Thursday.
The dollar <JPY=> fell 0.6 percent to 96.95 yen.
Traders said deleveraging and risk aversion would continue
to dominate sentiment in volatile trade as markets anticipate
the G20 meeting in Washington later in the day.
Heading into the G20, analysts were wary on prospects for
the event to yield major changes in the international financial
structure, which would likely keep investors away from taking on
risky positions and continue to boost the dollar and the yen.
"The best that might occur would be a reiteration of
commitments by governments to cooperate in reigniting global
activity and possibly some increase in support for IMF lending
from large surplus/reserves rich countries," analysts at
Barclays said in a research note.
They added the risks stemming from the gathering included
the possibility disagreements between nations on the causes of
the crisis and long-term financial market reforms obscure the
common ground on immediate policy needs, which could slow the
recovery of the financial system.
(Reporting by Veronica Brown; Editing by Ron Askew)
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